Basic Understanding of Blockchain and How it Works?

What is Blockchain?

Before, entering the topic I want to tell you that, where the idea of it came from. The idea came from the article "How to digitally timestamp a document?" published by Stuart Haber and W. Scott Stornetta in 1991.

Now coming to the topic, we will discuss what is blockchain.

In very simple words, Blockchain is a distributed immutable ledger that is completely transparent.

Now, let's understand every meaning of the words.

What is an immutable ledger?

Let's take an example, suppose you bought a wheat flour of Rs.700 from a grocery store but you didn't bring the money. You promised the owner to pay later, so the owner will write your amount in his register(i.e. ledger). But the owner tampered with the amount and made it into Rs.800 and when you return your amount, he will show you the register and make you pay the extra amount than its actual.

At, this time you don't have any proof that you bought the item for less money. That's where the blockchain feature comes in, where once we enter all the details, it cannot be changed. That's what an immutable ledger is.

A ledger is just like a file where we store the data.

What is a transparent and distributive process?

Taking the previous example, What if there is software that can tell us about the whole transaction process so that we all know about it?

In the blockchain, it happens very easily as whenever a new transaction is added it will added to all users who have that blockchain.

The blockchain is distributed to all the nodes or in simple language to the users. Suppose, initially all the users have their chain and they are linked together to each other like this:

Whenever a new transaction is created (i.e. block is mined) it will appear attached to all the users who are using it, because it is transparent and all users should know about it. Now, the diagram will look like this:

This system is also an example of a Decentralized System. This is the system where the data is not owned by only a single person. The data is owned by all of the users in this system. We will discuss all the things in the upcoming blog.

Okay, now you have understood briefly about the blockchain and how it works.

A Short understanding of how Blockchain works.

I will give you an overview of how a blockchain works. I will cover this deeply in the next blog.

Every block of the blockchain has its unique code called a hash. The hash is hexadecimal code which is unique to each block. The blockchain works on the hashing algorithm.

Let's understand through a diagram.

In the blockchain, every block contains a hash of the previous block and the next block so it will connect to the previous block and the next block respectively. That's how a chain is formed through blocks. The first block of a blockchain is called as Genesis Block.

Whenever we add a transaction, a block is created and added at the last of the chain which has a hash of the previous block and its hash.

When a data is added into the data section or removed from the section the hash of the corresponding block changes as the hash value is unique to that particular data. So we have to take care while adding the data, as cannot modify the data after the block is created or in other words a block is mined.

I will tell you through the diagram:

Previously our hash was:

Now, our hash becomes:

How the process is working, we will cover it later. I want to give an overview of what the process is happening. Ignore all the terms in the diagram we will cover it later.

I hope you now have a basic understanding of what is blockchain and how it works.

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That's it for this blog, see you in the next blog.